Buying a home in today’s market means understanding your financing options. One way to ease into your monthly payments, especially in the first few years of homeownership, is through a mortgage buydown. But not all buydowns are created equal.
In this post, we’ll break down what 3-2-1 and 1-0 buydown mortgages are, how they work, and how they differ from a permanent buydown. If you're planning to buy a home and want to lower your mortgage payments, this is a strategy worth knowing.
A mortgage buydown is a financing tool that allows a borrower to reduce their interest rate by paying an upfront fee. This lowers monthly mortgage payments either temporarily or permanently. Buydowns are often negotiated as part of a purchase contract and can be paid by the buyer, seller, builder, or lender.
There are two main types of buydowns:
Understanding how each one works can help you decide which makes the most financial sense for your situation.
What Is a 3-2-1 Buydown?
A 3-2-1 buydown provides a temporary reduction in the mortgage interest rate for the first three years of the loan:
This option can be especially attractive for buyers who expect their income to increase over time or who want to ease into higher payments.
A 1-0 buydown is a simpler version that lowers the interest rate by 1% for just the first year:
This option works well for buyers who want a short-term cushion as they transition into homeownership.
Temporary buydowns must be funded by the seller as an incentive for buyers.
A permanent buydown, also called paying discount points, involves paying a one-time upfront fee to reduce the interest rate for the entire life of the loan. This can result in significant long-term savings on interest.
For example:
- On a $300,000 loan, paying one point (1% of the loan, or $3,000) could reduce your rate by approximately 0.25%.
- That lower rate remains in effect for the entire term of the loan, whether it's 15 or 30 years.
This strategy is best for buyers who plan to stay in the home for many years and want to minimize their total interest cost over time.
| Feature | Temporary Buydown (3-2-1, 1-0) | Permanent Buydown |
| Duration | Temporary (1-3 years) | Full loan term |
| Payment Source | Often seller or lender | Typically paid by buyer |
| Goal | Ease into payments | Lower payments long-term |
| Best For | Buyers with future income growth or short-term savings goals | Buyers staying long-term and focused on total interest savings |
The right choice depends on your financial goals and how long you plan to stay in the home. If you’re expecting future income growth or want to reduce your initial costs, a temporary buydown might be the better option. If you’re planning to stay in your home long-term, a permanent buydown can offer more savings over time.
At CPF Mortgage, we help you evaluate your options based on your individual needs. Whether you're a first-time buyer or refinancing, we’ll walk you through every step to ensure your mortgage strategy works for you—not just today, but for years to come.
Ready to see how a buydown could work for you? Let’s talk through your numbers and customize a mortgage plan that fits.
Contact CPF Mortgage today to get started. We proudly serve homebuyers in Florida, Georgia, Tennessee, and Colorado.
If you have any questions about 3-2-1, 1-0 buydown options, or permanent rate buydowns, don’t hesitate to reach out. Give us a call at 727-226-1040 — we're here to help you understand your mortgage options and make the best decision for your home financing goals.
